Monthly Archives: December 2008

Gagging Speech

15 December 2008

I just learned today that China has blocked the Britsh Broadcastng Co’s web site ( to see article, click here ).  In a way, this is surprising, because that organization has such a reputable, worldwide reputation.  Yet, in other ways it is not unexpected.

When first went to China in 2004, we could still get the B-BC news broadcast over the air from Hong Kong.  At some point, however, they managed to say something that caused them to be banned from the public airways.  I remember one time, watching the show:  "In New York today, yada yada yada, in London yada yada yada, in Paris yada yada yada, in Amsterdam yada yada yada, in Hong Kong yada yada yada, in Beijing . . . ," then immediately there was a brief period of static, and the show switched to a tour of a washing machine factory.  A few minutes later, the show resumed, "In Seoul, yada yada yada." A few weeks later, the broadcast disappeared altogether, and something else replaced the program in the evening lineup. 

* * *

This difference in free speech is was one of the most noticeable things for me, about public life in China.  It’s not that people don’t protest; they do.  But protests are much more tightly controlled.  One time when we drove by a protest, I noticed that the peaceful band of people holding up signs was surrounded by a battallion of policemen in full riot gear with batons.  Another time, however, I was told that some anti-Japanese protests were actually incited by the government.  When the anti-Japanese sentiment became too strong (with over 100,000 people protesting marching on a street of my city), the media switched its tone to a more moderate line, which effectively quelled the intensity of the protests.  So, public speech and protest is largely controlled and regulated by the government. This entanglement of government in deciding what is permissible speech wouldn’t happen in my native country (or, would it?). 

In the USA, we place a particularly high value on the freedom of speech.  The First Amendment to our constitution states: 

"Congress shall make no law . . . abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble . . . . "

* * *

It’s a messy fact, that free speech can even be embarrassing.  Why would I protect speech that I personally find offensive?  Why would government allow speech that may be false or misleading, or critical of government itself?  The basic theory is that if all ideas are aired, citizens can sort out the facts and choose the course of action of their government accordingly.  We rely on citizens, rather than our government, to sort out truth from fiction.  If government controlled what was said, it would only allow expression of opinions that were not offensive to itself.  Much as the Chinese government is doing now. 

There are different viewpoints and opinions about this elsewhere in the world, however.  Free speech is not valued in some cultures, particularly in cultures which are not so comfortable, for one reason or another, with the messiness inherent in a culture that allows free speech.  It reminds me a bit even of a difference one can observe in parenting style. 

When my first daughter was born, I always kept her very clean and neat.  When I returned to work, I hired as a nanny a woman who was an expert in child development.   She had a two year college degree in early childhood education, and she had worked for many years as a nanny for families in New York City, where she had made her career.  I was only so fortunate to find such a gifted woman to be my nanny because she had recently retired back to her home community in the rural South.   This lady, named Erdell, also agreed to keep the house straight and to have supper ready when I got home from work.  What a treat!  Every day when I came home from work, the baby would have been washed, the house was straight, and supper was ready to go on the table.  I could hardly believe my luck! 

Imagine my surprise, therefore, when I arrived home from work an hour early one day, unexpectedly, only to find my precious baby on the floor, clothed in nothing but a diaper.  Newspapers had been laid all around the floor, and she was sitting on them, in the center.  In front of her, there was a full bowl of infant cereal.  She was holding a spoon, playing in the cereal, and she was covered in it.  Not only was she smeared from head to toe in the cereal, it seemed, but it was all in her hair, all over the newspaper, everywhere.  The nanny explained to me that the baby was playing it it, learning how to hold a spoon, learning how to eat with the spoon, and exploring the flavor and texture of the new food. 

Democracy is like this.  It’s messy.  When a culture is learning how to use free speech and democracy, sometimes there is exploration.  The spoon doesn’t always go right into the mouth.  There is a learning process.  Sometimes there are mistakes that need to be cleaned up.  It can feel very uncomfortable to experience and watch this process, perhaps a bit like looking at a baby who is smearing food all in its hair.  But, hopefully, eventually the baby does learn to use the spoon and learns how to feed himself rather than being "spoon fed" all its life. 

Thailand reminds me a bit of this, just now.  The process flows along by fits and starts.  Sometimes a military becomes uncomfortable and seizes power (as did the military in Myanmar), or a government stifles free speech as a means of propelling things in the direction it sees as appropriate (China).  And sometimes it’s hard to distinguish good faith efforts to avert social and governmental catastrophe from bad faith efforts of despots to gain control merely to aggrandize and enrich themselves.  If I were in a position to do so, I would try to reassure governmental leaders in places such as China or Thailand or Malaysia, that so long as violent and intolerant elements are controlled (those who would seize power purely for their own interest), and so long as the country remains governed by rule of law, things will work out. 

Similarly, for Americans looking at world events, I would say, "Take a deep breath.  It’s okay."  The main thing Americans and western Europeans need to remember, I think, is that it’s a mistake to assume that everyone is like ourselves, or that every population has the same degree of readiness for democracy.  I would suggest to both groups, resist the urge to jump in and clean everything up right away.  Resist the urge to arrest protesters.  Resist the urge to demonize those countries where protesters are arrested.  Resist the urge to demonize the protesters.  Resist the urge to manipulate the media.  Don’t worry whether Thailand will fall into chaos.  It won’t; things will settle out.  Even if the process is messy, the baby will eventually learn to use a spoon.   

___________________

For an interesting news article: 

Surveillance of Skype Messages Found in China

By JOHN MARKOFF

Published: October 2, 2008

A Canadian human rights group has uncovered a system that tracks politically charged text messages sent by customers of Tom-Skype, a joint venture of which eBay’s Skype is a partner.

For full text of article, click HERE

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Pindaya Cave

http://xanskinner.spaces.live.com/blog/cns!F92952EA9124A41B!3011.entry#comment

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SUSTAINABLE ENERGY

December 8, 2008

I just found this video about solar power which I would like to share with friends of all nationalities.  This is something we can all learn more about and incorporate into our own decisions about energy sources! 

Clean and Green! 

 

 

 

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PRIVACY OF ELECTRONIC TRANSMISSIONS BY EXPATRIATES LIVING IN CHINA

November 26, 2008

When we were anticipating our move to China, we imagined that "Big Brother" would be reading our emails and listening in on our phone conversations.*  Little did we know how true this would be! 

While we always assumed that any conversation might be monitored by the government of our host country, that thought was no surprise to us, because was right in keeping with our Orwellian understanding of Totalitarian systems of government.  We were educated in high school to believe that "they" don’t value freedom and privacy the same way that "we" do. 

After all, one of the major differences between totalitarian and free societies is the protection of civil liberties, right?   It was my paradigm that in the USA — in the land of the free — we have not only right to freedom of speech, freedom of religion, or freedom from warrantless searches, but also the "penumbra" of rights (think of this as an umbrella) which are necessary to effectuate those expressly protected rights.  One of the watershed cases giving voice to this "penumbra" of rights was the case of Griswold v. Connecticut.  The U.S. Supreme Court discussed several of the enumerated rights within the Constitution and noted that the Right to Privacy was a fundamental cornerstone which underlies those rights.**  The U.S. Supreme Court has established that this penumbra of rights is protected by the 9th and 14th Amendments to the U.S. Constitution.***  

In other words, as an American, I have a general right to privacy and freedom from unreasonable government intrusion into my private affairs.  It goes beyond the "letter of the law" in terms of what is expressly enumerated in the U.S. Constitution.  Under the 9th and 14th Amendments, this right to general privacy in my affairs extends to things the "founding fathers" could never have imagined, such as freedom from government intrusion into my right to use birth control or the right to home school my children. 

This is not to say that police in the USA can never listen in on my phone conversations.  If police want to listen in on my conversations in the USA, all they have to do is to convince a judge that maybe I’m breaking some law.  If they convince a judge that I might be engaging in criminal activity then there would be "probable cause" to justify a warrant.  The judge would then grant an order to allow police to listen in on my phone calls, intercept my emails, search my computer hard drive, or conduct any other kind of search which might be reasonable under the circumstances. 

There are no such controls in China.  For one, the judiciary is neither as influential nor as independent.  Secondly, it’s not a society built on the notion of the individual as an independent unit, entitled to so much privacy and consideration.  I wrote in another blog entry a few years ago, that it was my observation that if the right of the individual were to be balanced against the collective need, the collective would trump every time.  I think I still agree with that notion.  In this context, what it means is that when the collective need of the society for order, for predictability, for regulation of conduct, is balanced against the right of the individual to privacy, the group’s interest will trump that of the individual.  

Westerners tend to react with shock and horror to this idea, but there are some good aspects to that.  For one, the China of today remains an orderly society in spite of a seething lava of discontent just underneath the surface.  Just 100 years ago, China was governed by feudal warlords.  This is not a society that has a long history of self governance or resolution of issues through public debate.  Order, in such a society, can be a good thing.  When riots do break out, they tend to become violent mob outbursts, not the nonviolent sit-in’s more commonly associated with protest in the West.  Crime, though it exists, is better controlled.  (I, personally, felt safer walking on the streets in China than I do in the USA.)  And when the collective power is applied to public works, the result is amazing.  The Three Gorges Dam is but one example.  Public debate was stifled, but the dam was built; and no matter what you think about it, that dam supplies power and controls flooding downstream, flooding which has caused catastrophic loss of life in years past. 

So, there he is, Big Brother watching out for us, watching over us in China.  The first thing one does upon arriving to live in China is to register at the local police station.  And if you don’t register, well, they know about it and come knocking on your door asking to see your passport. 

As for the electronic eavesdropping, it’s not that we ever really knew about it or could prove it was happening.  No little message pops up on the screen and says, "Hi, my name is Xiao Xin and I’m going to be monitoring your email messages this morning!"  Whatever monitoring was done was completely invisible — perhaps even all conjecture on my part. 

 

(Thanks to
http://appli-etna.ac-nantes.fr:8080/peda/disc/lv/anglais/BTS/03gp1.htm
for link to this image)

Instead, I found myself wondering now and then . . .

  • Gee, my email seems to be loading really slowly this morning.  Is it a coincidence, or is someone inside there just a slow reader? 
  • Was it just a coincidence that my computer crashed right when I finished typing that "T" word? 
  • Was it really a computer malfunction that caused my internet to die for a week when I said "x" in an instant message?   (This happened fairly often, and I came to imagine these mysterious blackouts as warnings, like slaps on the hand, but who knows, maybe they really were random with no human explanation other than it must be my computer.)
  • What’s that little clicking noise on my phone? 
  • Why didn’t my mom respond to my email, did she get the message? 

I’ve read that there are over 100,000 people in China who are employed to spy on personal electronic transmissions. 

Bill Clinton was right in one crucial aspect, however, which is the value of engagement.  Electronic communications and email are so pervasive in China that it is impossible to monitor every conversation or every transmission.  The web relies on key words to be trapped by computer programs designed to flag certain conversations.  For example, I’m told that if you type one of the forbidden "T" words, a computer program will flag that email for special examination.  A human will then determine what to do.  If the person who typed something forbidden is Chinese, and if he is a blogger, he might have his computer confiscated or worse.  For me, well, . . . I might just lose my internet connection for a few days, or, maybe it would go through.   Most of my Chinese friends, however, think that even this is fairly low risk.  They say there are so many people using the internet now in China that it is impossible for Big Brother to read or control everything. 

As part of the solution to stifling speech, in China there are whole domains of names that are blocked.  What we refer to as the "Great Firewall" makes it impossible for people to use the internet to research controversial views about certain topics.  For instance, all of Wikipedia is blocked (because of factual assertions concerning some of the "T" places that are contrary to government viewpoints); all of Blogspot and Livejournal is blocked.  For some reason, at one time all of the website of GWU (a university my daughter was applying to) was blocked.  There are certain terms that one simply cannot research.  (If you use common sense, you can think what these might be; I’m not going to type them here!)  This was the subject of the famous journalist discontent during the Olympics.  It’s not my intent to talk about the Firewall in this blog post, however; but rather I wish to discuss the direct monitoring of conversations by humans who listen in on them. 

The bottom line is that in the USA, you need a warrant to listen in on a phone conversation; in China you don’t.  This is no surprise, it’s right in keeping with our notions of the differences between the two countries.  Isn’t it?  After all, the two countries are very different, aren’t they?  Or, I always assumed they were.  Unfortunately, in recent years my assumptions have been assaulted. 

One time I was joking on the phone, in an international phone call, with a friend.  I said something stupid, meaning I joked about a "nuke" or a "uzzi" or something equally ridiculous, which could have been quite threatening if it had been real.  My friend cautioned me not to talk like that.  I said, "Yeah, the Chinese government might not like it too much."  He replied, "It’s not just the Chinese.  There’s this new thing called the Patriot Act.  You should be careful what you say." 

Well, I guess he was right, except it wasn’t the Patriot Act.  I learned just this week that it’s called the "foreign intelligence" exception to the Fourth Amendment requirement of a warrant for searches and seizures. 

The Fourth Amendment to the U.S. Constitution reads: 

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

The Fourth Amendment is the basis for everything we Americans take for granted about the requirements of search warrants.  There have been exceptions carved out from time to time.  For instance, the mobility of an automobile means that it might be removed from a crime scene before a warrant could be obtained.  This has led to a whole body of law dealing with "exigent circumstances" and various exceptions to the requirement of a warrant.  Though there are several similar exceptions, nevertheless, the police agency is supposed to obtain judicial oversight whenever possible. 

I want to stress, the only requirements of the Fourth Amendment are (1) reasonableness and (2) judicial oversight.  Is this so much to ask?  I really don’t think so!  Policemen need to stay within the law, too, and judges help them do that.  This system of checks and balances, with the executive power being moderated by the judiciary, is one of the strengths of our government that every high school student is taught about in basic civics class.  

As for exceptions to the warrant requirement, I suppose the fact of being overseas could, itself, be considered in the same category as an "exigent circumstance,"  but that doesn’t seem to be the basis for the possible "foreign intelligence"  exception.  This exception has three bases:  (1) the president’s power to conduct foreign relations; (2) the costs of imposing a warrant requirement; and (3) the absence of warrant procedures.  It’s a Cold War doctrine, warmed over.  This exception has always been applied as against foreign powers and their agents, not U.S. Citizens residing abroad.  Until just a few weeks ago. 

In the recent case of  In re Terrorist Bombings of U.S. Embassies in East Africa (Fourth Amendment Challenges), (for link to this 11/24/08 decision click HERE), the Second Circuit Court of Appeals decided that the foreign intelligence exception would be applied to warrantless wiretapping and search of a U.S. Citizen living abroad.

A brief perusal of the decision appears, to me, to be a sharp slide down a short, slippery slope.  The rationale for leaving out the judiciary from the probable cause determination don’t really seem to apply here.  This case did not involve sensitive negotiations with or between foreign governments, it does not involve a non-U.S. citizen or any issues regarding sovereignty of another country’s judicial standards or processes.  These days, there are very fast and economical ways of communicating with federal judges, even across vast distances.  An order issued by a U.S. judge regarding a U.S. Citizen would not need to involve any other power nor affect any right within the foreign country.  Moreover, the fact that the drafters of the Fourth Amendment did not envision this particular application does not change the fact that it was intended as a protection of the rights of citizens  Finally, it is no excuse that procedures are not currently in place.  Procedures are not impossible to create.  

I must say, this decision flabbergasts me in its narrow mindedness and dogged determination to rationalize limiting the scope of a right that is fundamental to the American notion of due process.  The court took more than a year to issue its opinion, which is 30 pages long, and one might surmise that the case got so much judicial attention and care because it was obviously headed for review by the U.S. Supreme Court.  However, the opinion is so badly lacking in analysis or precedent that a first year law student could have written it.  I can only hope that when the issue is finally decided at a higher level, it will receive the proper briefing and painstaking analysis that it deserves. 

In a sense, my concern over the depth of this issue is needless. For one thing, as a practical matter, eliminating the warrant requirement is not going to make a diddly damn bit of difference for most Americans living abroad.  It will be as transparent to other, ordinary people as it was for me.  Secondly, as currently applied, the erosion of the warrant requirement will only affect criminals.  In order for it to impact ordinary citizens, it will have to be combined with erosion of other rights, such as free speech.  The painful erosion, in other words, would only occur when the warrantless search were combined with curtailment of free speech.  It’s only in that monopoly game, as yet unplayed, when whispered conversations critical of government land the player in jail.  On the other hand, what does this say about erosion of that which it means to be an American?  about values concerning fundamental rights and liberties we take for granted as U.S. Citizens? 

There is a saying that "bad cases make bad law."  Nowhere is this more evident than in the knee jerk responses to 9-11.  Yes, of course as a country we must fight terrorism, lawlessness, and intolerance.  But we need not become terrorist , lawless, or intolerant ourselves in the process. 

___________________________________________

*(The term "Big Brother" is a reference to the surveillance activities in the novel 1984 by George Orwell.) 

** For those strict constructionists who think there ought to be no rights other than those specifically enumerated in the Constitution, I’ll note that Griswold was decided not in the context of abortion, but rather to strike down a Connecticut law which made it a crime to prescribe any form of contraception.  In other words, unless you believe the government should be able to forbid any form of birth control whatsoever merely on the basis of right or wrongness of birth control itself (as opposed to regulations designed for safety or health), and unless you agree with the notion that police ought to be able to come into your bedroom to ascertain whether you are violating anti contraception laws, then you too agree with the fundamental idea that there ought to be a Right of Privacy, and thus you cannot be a strict constructionist.  

***The 9th Amendment reads, "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people," while the Due Process Clause of the 14th Amendment reads, "nor shall any State deprive any person of life, liberty, or property, without due process of law;" with the concept of "Due Process" construed as encompassing everything that it takes to ensure the rights enumerated in the first seven Amendments.   

 

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The Challenge of Chinese Joint Ventures (or “More Melamine Mis-Adventures”)

December 2, 2008

China has the problems of any transitional economy," says Yanzhong
Huang, a global health expert at Seton Hall University in South Orange,
N.J. "But the deeper and more fundamental challenge China faces is a
systematic lack of business ethics."

"You cannot fully police the whole food chain," adds Dali Yang, a politics professor at the University of Chicago. "A lot
depends on changes in social norms. People have to recognize that integrity does matter.

 from "Behind bad baby milk, an ethical gap in China’s business"  Christian Science Monitor, 17 September 2008. 

The business ethics of substituting melamine for legitimate protein sources has already been a topic of discussion on my blog.   In June of 2007, the topic on my mind was use of melamine in dog food ( http://xanskinner.spaces.live.com/blog/cns!F92952EA9124A41B!2105.entry ).   

It makes little difference what the context, I think.  Dog food, infant formula, milk chocolate candy:  it’s all the same when you get down to it.  Fill in the blank with the product of the day, and it still fits right into the same equation in terms of business ethics. 

Namely, the current melamine-to-dilute-milk scandal exemplifies an attitude of doing anything to cut cost — without regard to quality, in disregard of health or safety standards — all in the name of greater profit.  It exemplifies a willingness to engage in deceit, or else an uncanny knack for focusing on petty terms of a contract (e.g. level of protein in milk) without regard to the underlying substance of the values those terms were intended to protect (e.g. a certain nutritional standard for food).

The other striking thing about this melamine scandal, as the ripples run through the food supply chain, is just how widespread it was.  If it had just been one bad producer, or one bad company, it wouldn’t be so surprising.  In this case, the problem is so widespread it points to a systemic failure of values. 

In a real sense, melamine is truly just the tip of an iceberg.  While the last melamine substitution scandal involved dogs and dog food, I hate to say it but I am so, "not surprised" that the line was not drawn at adulteration of food intended for animals.  In the adulteration scandal before the dog food (the one that didn’t make it into USA newspapers because it only affected people in Third World countries), Chinese manufacturers had substituted chalk for the key medicinal ingredient in a pill to treat malaria.  They had even put acetaminophen (the ingredient in Tylenol) in the counterfeit drug, luring people into thinking they were recovering from malaria instead of receiving further treatment.

Think about it.  Someone sold chalk under the pretense that it was a pill to cure malaria.  As reprehensible as it might be, selling chalk as a cure for the common cold isn’t likely to kill someone.  But selling chalk as a cure for a treatable, deadly disease, and on top of that to insert an ingredient that disguises symptoms and thus further delays real treatment until the person really cannot be saved by any medicine?  This goes beyond audacious.  In an earlier blog entry on the malaria topic, I equated this conduct with murder because of a legal analysis regarding the elements of intention and forseeability of death. 

If a culture has fostered an ethical system that values profit more than human life, why does it come as a surprise that the same value system would be applied when it came to the business opportunity to substitute melamine as a "protein" ingredient in baby formula and milk products, even knowing that it would cause harm to thousands upon thousands of humans?  The only difference here is that the consumers affected were more powerful than dogs or people in Third World countries who were afflicted with malaria.  As such, they aren’t taking the news standing down. 

Well, here’s my take on it:  "Three strikes and you’re out."  How long will the world go on trusting Chinese companies (or Chinese regulators) to ensure the safety of any product that goes into the world market stream?  It’s amazing that the Chinese government can act so swiftly and effectively on some things, and be so stymied by others.  Something does not compute. 

Rather than beat these dead horses, however, I’ll move to a different topic that is highlighted by the current case study in the news.  That is, the danger that lurks for Western companies contemplating the formation of joint ventures with Chinese firms.  The precise danger, highlighted by the current melamine scandal, is that Western-based companies might fail to realize the extent of the difference in values, and hence in business ethics (and decisions stemming from those ethics), between themselves and their Eastern-based counterparts or culturally nonwestern managers. 

Just last month, I spoke in a blog entry of the need to listen to the white noise, to pay attention to cues that things may not be what they seem.  This is one area where the white noise consists of small indications of a value system that is widely different from one assumed by many Western managers to be common everywhere.  I once watched a television round table discussion in Hong Kong consisting of CEO’s of various large, multinational enterprises doing business in Hong Kong.  None of the managers, whether Western or Asian, would admit that there was a screaming disjunct in values between a Western and an Eastern based enterprise.  In this regard, and in the interest of being "politically correct," I think they were being less than candid. 

Many companies only see a potential market in Asia, or a potential labor source, and they fail to recognize crucial cultural differences which much be addressed as a condition to successful integration of business in the East and West.  A Western company seeking to enter the playing field in Asia must force itself to see outside its own cultural paradigm in this regard; it absolutely must be conscious that very different cultural standards govern the way business decisions are made in different cultures.  A manager, or company, that fails to understand this, will find itself surprised in some way if they assume that the standards of the native country will be adhered to in the host country. 

This is not to say that Asian organizations lack values.  They just place them in a different hierarchy.  It’s a hierarchy that has some distinct strengths, but it’s a different paradigm than that which a Western company will take for granted.  As just one example, a Western paradigm of what a "corporation" is fundamentally is based on the idea of a joint stock company, where the owners are shareholders and the management works on behalf of the shareholders.  As such, objective competence is highly valued; training or promotion opportunities depend upon demonstrated competence and leadership.  An Eastern paradigm, however, is more in line with a small family enterprise grown big.  Managers are groomed and promoted based on family ties and loyalty; with training and promotional opportunities allotted based on status and seniority. 

There is strength in the approach of grooming and promoting managers based on personal ties.  The strength of such an organization, of course, is that it keeps control within a very tightly defined circle of confidants.  It works particularly well for personal security of the individuals who are insiders within the management structure.  But in a western organization, much of what happens would be negatively categorized as nepotism.  I’ve been told that a typical Asian work force is so closely tied by blood and relations, that a new management can only be brought in by wholesale housecleaning.  Someone coming from a Western model based less on personal loyalty and more on personal competence, however, had better be aware of this from the outset.  One of my western friends working in an Asian organization described not a glass ceiling but a steel one, as he realized that he could devote his entire career to one company and never overcome the "outsider" label.  On an institutional level, it can mean that the western managers and eastern ones are simply not on the same playing field, as the same duty of loyalty is not owed to the outsider. 

As a corrolary to this, I’ve been told by more than one source (not that I’ve verified it myself) that an Asian organization will often have two sets of books.   One set is the "real" set of numbers, kept in a secret off-site location and known only to a few top managers who are very loyal to each other, and a second set of books which is the official copy.  One friend of mine even told me of a computer program that automatically took the numbers input for one and created the numbers for the second one.  This second set of books is the one which the Chinese organization will share with its western partner in the joint venture.  (Squeamish yet?  Better to know than not to know!)

In my opinion, the real value of the expatriate manager is that he or she brings the home country corporate values and culture to the overseas operation.  The best success comes when the expatriate manager is given tools and training to help drive those values into the Asian counterpart.  That tool chest must include actual control over the company and its day to day management.   Companies that are successful at incorporating their Western managers into their Asian operations manage to merge the greatest strengths of Western companies (quality, integrity, precision, design, human rights) with the great strengths of Asian ones (leanness, cost effectiveness, worker diligence, loyalty).  Companies that do this will thrive.  Those that fail to do so will fail.  It is a high stakes decision.

Having observed the life of an expat manager, and having become friends with many expat managers from many companies and many countries, I’m more convinced than ever of the truth of this.  Many companies move operations to Asia as a means of cutting cost while taking advantage of an excellent labor force.  In cutting cost, they may be tempted also to cut the cost of the expat manager, who tends to cost much more than a local hire.  This trend is evident in recruiting literature.  Companies think they can save a lot of money hiring a native of the host country to run their overseas operation. 

Certainly, there are advantages.  The person is likely to work for a lower salary than an experienced top level international manager.  Moreover, they are unlikely to need the support that an individual needs when working outside their home culture, for example education allowances for children or translators.  They will also have none of the issues associated with personal and family adjustments to living in a foreign culture. 

I think it’s a mistake, however, for a company to imagine that a non-expat manager could possibly have the same perspective as an expatriate.  Just think of one thing, the issue of cultural adjustment.  At some level, isn’t cultural adjustment what it’s all about?  The idea is to have cross cultural fertilization, to gain the benefit of meshing the best of two very different cultures, isn’t it?  If the company’s home culture is left at home, that won’t happen. 

What value does it bring to a company to have an expat manager?  Well, if by enforcing a quality standard the manager saves a company from being bankrupted by products liability claims, he’s more than earned his keep.  In terms of driving company values, the expat manager just might be worth his weight in gold, sometimes literally. 

While the essence of driving corporate values can be regarded as intangible and even unimportant, it’s not, really.  When western values are driven into the corporate culture, it does show up in the bottom line.  Among other ways, it shows up in risk management.  When there’s an earthquake, concrete has been properly reinforced and mixed, and buildings don’t collapse.  There is no lead paint in toys.  It shows up in employee retention, raising the level of expertise and reducing the need for constant retraining.  These are just a few things I can think of without even trying.  I’m sure that a good business student could brainstorm a few more. 

Indeed, I’d venture an opinion that the most important thing an expatriate manager can do is to drive corporate culture and corporate values into the overseas operation.  This is the soft, squishy realm of mission statements.  It means grappling with the policy issue of "what kind of company do we want to be." 

The mission statement, that statement of corporate values, is so important because it sets the guidelines for how the company will respond to more specific questions.  It points to the answer to questions like:  "Do we want to focus on bottom line balance sheet issues and ignore the safety and health violations on our factory floor?  Do we want to supply modern equipment, training, and safety standards including ear plugs even if that adds a few dollars to the cost of what people will pay for our widgets in Wal Mart?" Values, indeed.  A company doing business in an international environment faces a significant crisis of identity, namely:  "Whose cultural values do we espouse?" 

Do we live by the values of the home culture or of the host culture?  Certainly, to some extent when in Rome we do as the Romans do.  Yet, there is also a bottom line which, if we cross it, causes us to lose the essence that distinguishes us.  A good expat manager knows where that line is.  A good expat manager is, of course, sensitive to and respectful of the values of his host culture.  With sensitivity, and with common sense, he will drive the values of the home office into the guts of the overseas operation. When the various sets of values are meshed and integrated, the three snakes working as a team are transformed by their efficiency into a dragon. 

This risk of joint ventures is that the Western values are not fully heeded or integrated.  The risk that expat managers will be overruled in the values department is a lesson that I bet the company Fonterra wishes it had learned sooner rather than later. Fonterra, a New Zealand company, owns a minority interest in Sanlu, a milk producer in China.  Sanlu happens to be the milk producer at the epicenter of the melamine scandal.  It was Sanlu’s expat Fonterra executives who happened to be the whistleblowers on the whole melamine-in-milk scandal. 

Here’s how the scenario played out:  The Fonterra executives sitting on the Sanlu Board, in their minority position, became aware of the melamine adulteration.  The New York Times reports: 

For Sanlu, a pivotal moment came on Aug. 2 when company officials informed the board about the melamine problem. Sanlu is a joint venture with the New Zealand dairy giant Fonterra. Fonterra owns a 43 percent share and has three members on the board. Fonterra’s executives say their representatives immediately pushed for a public recall at the board meeting, only to be overruled by the rest of the board.

***

The problem was finally exposed in September when the New Zealand government, after discussions with Fonterra executives, contacted authorities in Beijing. Beijing officials say they knew nothing about the scandal until September, though a Fonterra company spokesman said the company believed the central government knew in August.  [All emphases supplied.]

Now imagine something.  Imagine that you were an executive sitting on that Sanlu Board, and you learned about the Melamine.  And then you learn that it’s no surprise to your Asian counterparts, that they are complicit in the decision and want to cover it up!  Think about it.  This is the Corporate Board.  It’s the highest level of corporate governance.  And think of how many lower, middle, and upper managers were aware of it, and all of them were complicit in the activity.  It’s as if the apple were rotten to the core.  Fonterra failed in the essential task of driving its corporate values into any portion of its joint venture with Sanlu. 

While the violin is different, the tune is not.  This same scenario gets played out day after day in joint ventures involving Chinese companies. There are many companies who, figuratively, look the other way.  They fail to notice quality issues, human rights issues, safety violations, supplier problems, tax evasion, double sets of books.  This may work, for a short time, but it’s not sustainable.  It’s a matter of probability:  something is going to come back to bite. 

One of my friends told me of the misadventures of her husband’s company.  I first met "Hilde" and her husband "Alfie" when Alfie was the freshly arrived general manager of a joint venture manufacturing operation.  It was easy to see why Alfie was a CEO.  He was extremely well educated and articulate, incredibly gregarious, outgoing, cheerful, and personable.  I imagine he had already proved his competence as a manager, since he had started factories on several continents for his company and had been successful.  He was eager to learn Chinese, to experience Chinese culture, and he was looking forward to the new China venture.   When I met him, he had already built the plant and was running it, with a Chinese staff, in the joint venture.  At our first meeting, he told me that the Chinese production managers had jumped the gun just a bit.  They had started production a few weeks ahead of schedule, resulting in some poor quality product, but he was certain it was a matter of training and the learning curve. 

But two years later, I learned his company was pulling out of the plant and was building a different facility in a different province of China.  Why?  The story was all too familiar.

Alfie’s home company was a German company, with a German company culture.  They wanted things done right.  They wanted their factory to be neat and clean, their processes and products precise.  They wanted the i’s dotted and the t’s crossed.  They valued their longstanding reputation in their industry, and they wanted to always be known for the quality of their products.  They viewed their reputation and the quality of their work as paramount.  Moreover, the particular product involved serious safety potential.  If manufactured incorrectly, people could be harmed. They took safety very seriously. 

None of these more or less intangibles computed with the Chinese managers.  In the eyes of the Germans, these Chinese partners seemed to care less about precision, cleanliness, safety, quality, or long term results.  And the Chinese owned 51% of the joint venture.  The Germans were stuck with an unworkable venture. The last straw had to do with the seeming lack of regard for quality.  As  result of quality issues, the company was losing reputation and market share. 

When I last saw her, Hilde told me that Alfie was the only German member of the management team left at this site.  The other Germans simply couldn’t tolerate what was happening.  When they would fly in for meetings, their meetings with the Chinese managers just deteriorated into shouting matches.  Hilde’s cheerful, optimistic husband had met his match.  He had thrown in the towel, and he was leaving, too.  At the new factory they were building in a different region of China, she said, Alfie’s German company was going to have full ownership and control, because they were not going to tolerate the kinds of management decisions driven by Chinese values. 

There’s another secret, too.  The Chinese managers know about the culture wars before the Western ones catch on that they even exist.  What surprises me about the Sanlu – Fonterra situation, actually, is that the Sanlu managers let the Fonterra managers in on the secret.  In many companies, the Asians would simply not tell the Westerners.  This underscores why it’s important to have Westerners on the ground, in positions where secrets are more difficult to conceal. There’s nothing like personal inspection to expose what’s in the closet. 

I won’t be popular for saying this, but yes, there is a culture war.  Yes, it really is all about values.  The question is, who is going to win the values decision?  What is the values statement your company wants to make?  Will the move to China, for your company, involve sacrifice of the very values which make your company unique and successful?  Do you still think the expat manager is too expensive? 

My mom once said to me, "If you think education is expensive, try the cost of not having one."  In a similar vein, I’d say, "If you think an expat manager is too expensive, try the cost of not having one."  Good luck. 

For a citation to the N.Y. Tmes article, see: 

International / Asia Pacific

Despite Warnings, China’s Regulators Failed to Stop Tainted Milk

By JIM YARDLEY and DAVID BARBOZA

Published: September 27, 2008

http://www.nytimes.com/2008/09/27/world/asia/27milk.html?ex=1380340800&en=3797ec22178524a9&ei=5124&partner=permalink&exprod=permalink

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